Indian benchmarks may open flat; banks in focus after RBI’s liquidity boost

Indian stocks are set to open little changed on Tuesday as the domestic central bank’s liquidity-enhancing measures are seen offsetting weak global sentiments following U.S. President Donald Trump’s unrelenting attack on the Federal Reserve.

Gift Nifty futures were trading at 24,164 as of 8:08 a.m. IST, indicating a flat start for the Nifty 50 compared with Monday’s close of 24,125.55.

The Reserve Bank of India (RBI) directed lenders to assign a lower-than-proposed buffer rate of 2.5% on digitally linked deposits, with a one-year compliance deadline, marking the latest in its ongoing regulatory easing.

“Our back of the envelope calculations indicate a ~2.5 trillion ($29.3 billion) to 3 trillion rupees increase in liquidity deployable, which implies a 1.4%-1.6% potential increase in credit growth for the banking system,” Macquarie said.

Bank stocks have led the benchmarks higher in the last five trading sessions on better-than-expected earnings from HDFC Bank and ICICI Bank, prospects of margin improvement after deposit rate cut and buying by foreign portfolio investors (FPIs).

Indian benchmarks log biggest five-day gains in four years as financials rally

“While valuations (of banking stocks) have expanded in the wake of the rally, they remain meaningfully below historical peak multiples, indicating limited signs of froth,” said Rohan Mandora, analyst at Equirus Securities.

FPIs bought Indian shares worth 19.7 billion rupees on Monday, as per provisional data, marking the fourth consecutive session of buying.

A softening dollar, which reduces India’s import costs and makes emerging market equities attractive for FPIs, helped attract foreign flows to India.

The dollar languished near its three-year low as U.S. President Donald Trump’s attacks on Federal Reserve Chair Jerome Powell eroded investor confidence in the world’s largest economy.

Asian markets traded mixed after a furious flight from U.S. assets amid concerns over the Fed’s independence of the Federal Reserve undermined Wall Street and the dollar.